Correlation Between ACT Energy and Leons Furniture

Can any of the company-specific risk be diversified away by investing in both ACT Energy and Leons Furniture at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ACT Energy and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ACT Energy Technologies and Leons Furniture Limited, you can compare the effects of market volatilities on ACT Energy and Leons Furniture and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ACT Energy with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACT Energy and Leons Furniture.

Diversification Opportunities for ACT Energy and Leons Furniture

-0.2

Correlation Coefficient

ACT Energy  Leons Furniture

Good diversification

The 3 months correlation between ACT and Leons is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding ACT Energy Technologies and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and ACT Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ACT Energy Technologies are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of ACT Energy i.e., ACT Energy and Leons Furniture go up and down completely randomly.

Pair Corralation between ACT Energy and Leons Furniture

Assuming the 90 days trading horizon ACT Energy Technologies is expected to under-perform the Leons Furniture. But the stock apears to be less risky and, when comparing its historical volatility, ACT Energy Technologies is 1.19 times less risky than Leons Furniture. The stock trades about -0.07 of its potential returns per unit of risk. The Leons Furniture Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,265  in Leons Furniture Limited on April 21, 2025 and sell it today you would earn a total of  460.00  from holding Leons Furniture Limited or generate 20.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ACT Energy Technologies  vs.  Leons Furniture Limited

ACT Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ACT Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Leons Furniture

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leons Furniture Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Leons Furniture displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACT Energy and Leons Furniture

The main advantage of trading using opposite ACT Energy and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACT Energy position performs unexpectedly, Leons Furniture can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leons Furniture will offset losses from the drop in Leons Furniture's long position.

The idea behind ACT Energy Technologies and Leons Furniture Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.